Job Relevance, Selection Rate of Candidates Are Critical Factors in Pre-Hire Assessments

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 By Genevieve Douglas

Dec. 17 --While most surveyed employers (55 percent) have implemented a pay-for-performance program, almost half (45 percent) expressed dissatisfaction with their program, according to Mercer's "2013 Pay for Performance Survey."

"That organizations are not satisfied with their pay for performance programs suggests that traditional financial incentives--the most common approaches--may be overused in situations or contexts where they are not the optimal choice," Brian Levine, partner and Workforce Analytics & Planning leader for the global consulting firm's North American Region, said in a Dec. 12 press release.

"There is often misalignment in terms of how the programs are implemented, and that's why there is a lack of satisfaction," Levine told Bloomberg BNA Dec. 16.

For rewarding performance, most organizations focus on financial incentives, according to the survey. Base salary increases and annual or short-term incentives remain the rewards most often linked to performance, reported by more than 85 percent of participating organizations.

However, this focus on financial incentives can present many challenges to employers, Jeanie Adkins, partner and co-leader of Mercer's Rewards practice, told Bloomberg BNA Dec. 16.

Survey findings revealed top performers receive twice the base pay and short-term incentives of average performers, which "does not leave enough money for the rest of the employees in a given organization," Adkins said. Furthermore, 63 percent of organizations indicated they are working to increase differentiation of pay based on performance, compared to just 2 percent trying to minimize it, she added.

It is also challenging to define the measures and metrics that will lead to the best implementation of a pay-for-performance program, Adkins said. In some industries, such as technology and innovation or research and development, performance goals may take a few years, and not align with annual assessment programs, she added.

The Mercer survey results are based on responses from more than 570 employers across all industries throughout the U.S. and Canada.

Alternatives Plans

For companies looking to implement an incentive program with the intent of paying for performance, Levine advised them to first look at the conditions of the work. For example, if the fundamental goals of the company are complex, or involve coordination and cooperation among employees, that needs to be taken into consideration.

According to Levine, alternative incentive models include:

  • A promotion-focused or so-called "tournament model," where pay varies significantly from one career level to the next, with less emphasis on differentiation based on performance between employees in the same level. In this model, the best performers get ahead and earn more via promotions based on relative performance evaluation.
  • A membership or "efficiency wage model," where overall pay levels are targeted above the market median and employees must perform to high standards to stay on with the organization. In this model, the desire to keep a relatively high-value position is what delivers incentives to perform well.
  • A service, or "bonding," model, where a trajectory of planned increases shifts pay from early to later in the career, once performance characteristics are credibly demonstrated. This model locks in employees over the long haul, preserving firm-specific knowledge that is key to productivity while enforcing performance minimums to stay on with the organization.

To contact the reporter on this story: Genevieve Douglas in Washington at

To contact the editor responsible for this story: Simon Nadel at

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